On June 1st 2017, the Luxembourg Supreme Court (Cour de Cassation) decided on the possible applicability of the rules on non-contentious administrative proceedings (Procédure administrative non-contentieuse), as laid down in the law dated December 1st 1978 and its implementing Grand-Ducal Decree of June 8th 1979 (the “PANC Acts”), with respect to value added tax (“VAT”). The PANC Acts represent a set of rules designed to ensure the protection of citizens’ rights in general non-contentious administrative proceedings as well as to provide for a certain level of citizen participation in the administrative decision-making process.
Whereas the law of December 1st 1978 clearly states that the PANC Acts do not apply to the field of direct taxation, their applicability with respect to VAT has been disputed in Luxembourg case law for several years. The majority of past judicial decisions, even at the level of the Court of Appeal, referred to parliamentary documents and held that VAT should be considered as implicitly excluded from the scope of the PANC Acts, because VAT disputes fall under the jurisdiction of the judicial courts, as opposed to the administrative courts. At least one ruling of the 9th chamber of the Court of Appeal however concluded to the contrary, and held that even though the judicial courts are entitled to rule on VAT disputes, the decisions taken by the Luxembourg VAT Authorities remain of an administrative nature, which justifies the application of the PANC Acts to VAT.
The recent ruling of the Luxembourg Supreme Court seems to support the latter position, as it does not exclude the application of the PANC Acts in the field of VAT. Indeed, the Luxembourg Supreme Court relies on article 4 of the law of December 1st 1978 which provides that the PANC Acts apply to any individual administrative decision which is not governed by a specific procedure laid down in a separate statutory provision and which provides for procedural safeguards which are at least equivalent to those provided for by the PANC Acts.
Even though the Luxembourg Supreme Court dismissed the taxpayer’s appeal on the grounds that the estimated assessment procedure (procédure de taxation d’office) laid down in article 76 of the Luxembourg VAT law (in its version applicable before January 1st 2010) foresees procedural safeguards which are at least equivalent to those provided for by the PANC Acts, so that the latter would not apply in the case at hand, the acknowledgement of a potential application of the PANC Acts in the field of VAT can nevertheless be seen as a step forward in terms of taxpayers’ rights. Aside from the protection offered by the Charter of Fundamental Rights of the European Union, which also applies to VAT according to both domestic and European case law, VAT taxable persons may, in the future, in those circumstances where the PANC Acts provide for greater protection of the taxpayer than the Luxembourg VAT law, be able to rely on the PANC Acts vis-à-vis the Luxembourg VAT Authorities.